Lan Xiaohuan on China’s Economic Rebalancing, Social Safety Nets, and the AI Race

Lan Xiaohuan is a professor of economics at the China Europe International Business School. He is the author of How China Works: An Introduction to China’s State-led Economic Development, a bestseller that has sold millions of copies in China and been translated into several languages.

In this interview, he explores the economic realities behind China’s record trade surplus, the critical need for a stronger social safety net, and how public data infrastructure is shaping the artificial intelligence race with the United States.

This interview first appeared in SCMP Plus.

Since the publication of How China Works, the global and domestic environments have both evolved significantly. What are the most critical shifts and developments for China? If you were to add a new chapter to the book to reflect these changes, what would be its central theme?

I would not add a new chapter; I would write an entirely new book. It is not that there are no new issues, but rather that addressing them effectively requires a completely new analytical framework.

Domestically, the decline of the real estate sector and the rapid rise of advanced manufacturing and technology represent profound shifts. My new book would likely focus on China’s industrial and technological development.

But actually, I think the most consequential changes are external: the lasting impact of the pandemic, the Russia-Ukraine war, energy market disruptions, and shifting political dynamics in the United States. In comparison, China’s domestic baseline has remained relatively stable.

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